KYX - Identifying risks in Banking Relationships

Transcription

1 Accuity KYX - Identifying risks in Banking Relationships accuity.com

2 2 Agenda Rising Risks Screening Areas and Approach Screening best practices Trade finance perspective Important Considerations

3 Accuity focuses on the needs of banks, financial institutions and corporations to ensure efficient AML screening while minimizing regulatory compliance risks Automated Trade Finance Screening 95% of the world s 500 largest banks Strategic relationships 175 years Offices in #AccuityTradeFinance

4 Rise in Conflicts

5 Regional risks are increasing

6 $2Tn Congressional report The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Financial Warfare or.

7 Rising Complexities

8 Cost of Compliance

9 Compliance Is Expensive, but Noncompliance Can Cost Even More Banks pay out 166bn over six years along with indictments and imprisonment

10 REGULATION Rising Cost De-Risk? Compliance costs Localized conflicts New targets New threats Complexity New domains... Risk policy requirements

11 Institutions Asia Pacific is affected by this trend, with a significant drop in correspondent relationships Asia/Pac No. Institutions vs. Corr Relationships No. Banks Corr Relationships (Beneficiary)

12 Screening Areas & Approach

13 Screening Areas KYX (X = Everyone!) Retail Banking Corporate Banking Human Resource Suppliers/ Partners Trade Finance FI Department The KYC requirements in these area s are very similar, with the all clients having to be screened against sanction & PEP lists All beneficial owners are required to be identified, with Corporate Banking senior management must be identified and screened In Private Banking banks typically conduct EDD screening, as many of these clients are typically High Net Worth Individuals and can pose a greater risk Trade finance are required to check all parties involved in the transaction, this extends to identifying the vessel, the route of the vessel, the banks, companies and all persons As part of the Due Diligence Process, the Head of FI is required to screen all correspondent banks against sanctions and PEP lists, this is extended to the senior management of this group

14 Risk Based Approach

15 Onboarding Process Overview Policy and Change Management Data Entry Screen Due Diligence Classify Risk Open or Block Monitor Manual Entry Sanctions Onsite Visit Assign Risk Category Audit trail of approvals Trigger Events File upload Validation PEP Private Lists KYX Documents Related Parties / UBO Highlight risk elements Assign level of DD Block & report Regulatory Changes Third parties experts

16 Screening Developments

17 Screening Relationships Sanctions List EDD/CTC Dual-use Goods PEPs Anti-social Forces Private List Manager Vessels Adverse Media Private Lists Sea Ports Scrubbing Engine (Rules + Algorithm) KYC On-boarding Customer Accounts Payment s SWIFT & Remittances Trade Finance Review Management Policy Process - Frequency

18 Point of Client Onboarding Quarter 1, 201X Quarter 2, 201X Quarter 3, 201X Quarter 4, 201X (Next Cycle) Current Developments - Process Automated Screening Up to 300 OFAC adds Up to 400 OFAC adds Up to 50 OFAC adds Up to 700 OFAC adds

19 Current Developments - Process Automated Screening API s Facilitate automation Trade Transactions Retail Cx Corporte Cx SWIFT Transactions Realtime API Realtime/ Batch Realtime API Unified Compliance Screening Platform Sanctions List Private Lists PEP News Enforcem ents data

20 Current Developments - Process Automated Screening API s Facilitate automation Traceability Full Audit trail Did you screen? Which? When? Why it dint match? Who Reviewed it?

21 Current Developments - FPR Precision control on Screening False Positive Rules Risk Scoring As in case of risk based approach specific rules and tolerance levels can be set for multiple datapoints This enables a tighter definition and lower false positives Create rules to eliminate the most common match patterns in your data set. Eliminate recurring matches through use of white listing Good File technology. Create Risk Scorecards according to your business rules. Prioritize higher score matches, eliminate lower score matches.

22 Risks associated with Trade Transactions

23 A global standard is emerging in identifying trade-based money laundering risks but we re not fully evolved yet FATF Trade-based Money Laundering report 2006 The Wolfsberg Group Trade Finance Principles 2009 EAG WG Internation al TBML report Dec.2009 US FINCEN SAR/TBML Advisory Feb APG TBML Typologies Report Jul UK FCA Thematic Review: control of financial crime risks in trade finance Jul JMLSG Guidance Trade Finance Nov MAS AML CFT Controls in Trade Finance Oct HKAB Guidance paper on TBML Feb. 2016

24 Risks go beyond screening payment messages Counterparty name(s) and location(s) Counterparty bank(s), their capacity in the transaction, and location(s) Customer name(s) including individuals and companies Carrier / charter / agent Consignee Country of origin Description of goods / commodities (Dual Use Goods) Freight forwarders and shipping companies Originating and recipient entities of the goods Shipper, consignee and notification party on transport documents Shipping route (such as the port of loading, port of discharge, port of transhipment Vessel name(s) and ownership Flag of vessel

25 Dual-use Goods include a wide range of goods that are designed for commercial applications but can also have military applications or potentially be used as precursors or components of Weapons of Mass Destruction

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27 Some important considerations Independent Review Ask an reputable company/auditor to review your current process and policy for KYC screening Training Ensure the management and teams focused on KYC screening understand the importance of this function Filtering solutions There are a number of leading local and international vendors who provide good software that will automate KYC and account screening for the banks Sanction Data The international sanction lists such as UN, EU, OFAC are changing all the time, make sure you have the correct mechanism in place to have the latest sanction data Good Customer Data You need manage quality customer data to have an effective KYC program. Garbage in = Garbage out

28 Thank You! Cory Mathews Head Of Sales SE Asia